Davidson $($HOG$)$: $.$

a$.$ Based on the current portfolio composition and the expected rates of return, what is the expected rate of return for Penny's portfolio?

splits it evenly between the two stocks, what will be her expected rate of return?

c$.$ If Penny does move money out of Treasury bills and into the two stocks, she will reap a higher expected portfolio return, so why would anyone want to hold Treasury bills in their portfolio?

a$.$ Based on the current portfolio composition and the given expected rates of return, the expected rate of return for Penny's portfolio is $\%.($Round to two decimal places.$)$

b$.$ If Penny moves all her money out of Treasury bills and splits it evenly between the two stocks, her expected rate of return for her portfolio is $\%.($Round to two decimal places.$)$

If Penny does move money out of Treasury bills and into the two stocks, she will reap a higher expected portfolio return, so why would anyone want to hold Treasury bills in their portfolio? $($Select the best choice below.$)$

A$.$ Although Treasury bills have a lower expected rate of return than stocks, they are risk$-$free compared to other securities$.$ Therefore, many people include Treasury bills in their porffolios to increase the risk of their portfolios.

B$.$ There is no reason for anyone to ever hold Treasury bills in their portfolios.

D$.$ Although Treasury bills have a lower expected rate of return then stocks, they are risk$-$free compared to other securities$.$ Therefore, many people include Treasury bills in their portfolios to lower the risk of their porfolios.

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